DIALOGUE

Holding Onto the Organic Vision

An interview with Arran Stephens, CEO, Nature’s Path

By Sarah Fister Gale


Arran Stephens is one of the organic industry’s pioneers. His corporate philosophy is simple: Be a trusted name for organic foods in every home, and be socially responsible, environmentally sustainable and profitable. It’s worked. In the mainstream cereal market, Nature’s Path may be small, but in the organic industry it’s one of the largest and most respected companies, with a long and impressive history of environmental stewardship and a commitment to the vision of sustainability, community, and spirituality that spawned the organic movement.

Stephens, who was born in 1944 and raised on an organic farm on Vancouver Island, opened Nature’s Path in 1985 with his wife Ratana. By the early 1990s, at a time when organic production was still a novelty, Nature’s Path’s line of breakfast cereal was the best-selling brand in North America, and Nature’s Path was the first cereal company to receive third-party organic processing certification.

Today, Nature’s Path is one of the few remaining family-owned companies of its size in the organic industry and has enjoyed an annual growth rate of 25% per year, with more than 30% growth in the U.S. in 2005. Its product lines include organic whole grain hot and cold cereals, breads, cereal and energy bars, toaster pastries, waffles, snacks, pastas, cookies and baking mixes under the Nature’s Path, EnviroKidz and LifeStream brands.

The company believes in partnering with, supporting and increasing the organic farms that sustainably produce its raw ingredients. In this way, Nature’s Path’s goal of expanding organic acreage while reducing mankind’s unfriendly environmental footprint is realized.

Stephens recently talked with Organic Processing about his vision of the organic industry today, the impact of conventional companies buying up independent organic entities, and where he thinks the industry is headed in the future.

OP: When Organic Processing profiled Nature’s Path two years ago, you said: “Once organic is accepted as an everyday reality, the competition will come like an avalanche.” You also said the entry of mainstream giants, such as Kellogg’s and General Mills, would help to raise awareness of all organic brands. Do you think those predictions have come true?

Stephens: ‘When the tide rises, all boats rises with it,’ is a truism. As the big acquisitors—Kellogg’s Kashi, General Mills’ Cascadian Farms, Kraft’s Boca Burger and Back to Nature, Mars’ Seeds of Change, Coca-Cola’s Odwalla, ConAgra’s Lightlife, Danone’s Stonyfield, Unilever’s Ben & Jerry’s, Dean’s White Wave (Silk) and Horizon Organic, and Heinz’s Hain, which operates Arrowhead Mills, Health Valley, Celestial Seasonings and others—have aggressively entered the natural foods marketplace, there has been much blurring of brand and organic identity. Kashi has only a small number of organic cereals in its stable, with predominantly ‘natural’ cereals and bars; Back To Nature has mostly non-organic ‘natural’ items; Hain has a big mixture of organic and non-organic items; while Cascadian Farms and Seeds of Change have kept their entire organic acquisitions organic. Mars has also done an excellent job.

Most of the significant independent organic and natural brands and manufacturers have been bought up by the above-mentioned big companies, which until recently, were known for their fast, unhealthy junk-food offerings and the “obesifying” of Western culture. Nestle, PepsiCo and other food conglomerates are also jockeying for a slice of the organic pie because they must see the organic/ natural sector offering more growth than their traditional flat-line markets.

There are a handful of significant independents left: Amy’s, Lundberg Family Farms, Eden Foods, Organic Valley, Traditional Medicinals, and ourselves. These companies offer quality organic products and, as far as I know, have no intention of selling out.

Nature’s Path and our long-lasting independent peers have all been enjoying strong and sustainable growth, even though our super-sized, late-arrival competitors have thundered into the arena, spending staggering sums to gain placement and pull-through deep-pocket spending. There is reason to believe that such behemoths might not have the same degree of commitment to organics, the environment, and bettering the world as the starry-eyed pioneers, but such is life. At least, more land is being converted to sustainable practices, and people are eating more healthily. So the tide has risen for all, but it’s a brave new world, increasingly complex and competitive. We are grateful that we continue to grow our marketshare in new and innovative ways.

OP: The industry has experienced rapid growth in the last few years. What impact do you think that has had on smaller organic companies, consumer perception of organics, and the direction the industry is going?

Stephens: As dedicated core consumers of organics find out that their favorite companies and brands are no longer owned by the idealists who founded them—but are now controlled by huge companies, driven by bottom-line profit and top-line growth—there could develop a disconnect. I know that there is a growing cynicism toward this co-opting of the organic industry. This, however, will likely be more than offset by all of the new mainstream customers attracted to organic products.

We feel that there will always be new and old customers coming to Nature’s Path because of the quality of our unique products, the way we do business, the authenticity that we bring, and what we give back to the community and the environment. Like our bigger competitors, we also promote, do constant research and development, employ the latest in human resource tools and technology, and try to harness the power of the grassroots support that we have earned over the past decades.

We are also driven by bottom-line profit and top-line growth, but we do it in a very different way. We believe in the triple-bottom line: socially responsible, environmentally sustainable, and financially viable.

OP: Even as mainstream companies flood the organic marketplace, Nature’s Path continues to remain on top. What choices did you make to ensure your company’s growth and success? What lessons can other organic companies learn from Nature’s Path’s success?

Stephens: It all comes down to the quality of teams and the individuals on those teams. To borrow a phrase from Jim Collen’s book, Good to Great, we aim to get the right people on the bus, making sure they are in the right seats. That also means getting those who don’t belong off the bus. We feel we have the most talented, inspired and aggressive (in a nice way) people in our industry, and we believe in rewarding them accordingly. Hire the best, and expect the best. Give competent people the authority and don’t constantly meddle. As leaders we must be focused on long-term strategy, not just quick return.

Success is a journey, not a destination, and it involves everyone and everything in the value chain: the earth and how we treat it; the farms and the farmers; the truckers, suppliers, and warehouse people; the clerks, the line workers, the managers; maintenance, R&D, human resources, information technology, quality assurance, finance, creative, sales and marketing teams; distributors, brokers, and retailers; and most importantly, the consumer. The enterprise has to be a service-driven strategy based on excellence, better-for-your-health, and innovative products that serve a need.

All of these factors, hard work, and a little luck, will determine your position in the market. Of course, it also helps if you believe in your products and your people, and practice a healthy lifestyle.

OP: Two years ago you were faced with an uncertain availability of raw materials, and you launched the Organic Program in an effort to work with organic farmers, brokers and millers to create a stronger existing organic farming community. How is that program going?

Stephens: Life in the heartland is not always certain. There are good years, lean years, and great years. Weather, insects, politics and water play significant roles. We’ve been able to maintain our high growth through excellent long-term relationships with key suppliers. Those relationships have been deepened by our Organic Program management, headed by agronomist Dag Falck, who is a free resource for farmers across the country, especially those who might require information on how to convert to organic or solve technical farming issues.

Mother Nature doesn’t always cooperate, and when yields for fruits, nuts and some grains decrease and demand increases, prices go up. We’re facing increasing costs on some raw materials and big increases in energy/fuel costs. But, we’re all in the same boat. We just have to become more efficient and continue our war on waste, while reducing miles traveled.

OP: Even though the recent amendments to the Organic Foods Production Act (OFPA) reversed much of the Harvey case ruling that would have eliminated the list of allowed synthetics for organics, and the 80/20 rule for converted dairy cattle, do you think the experience has changed the organic industry?

Stephens: I think Harvey’s case was a wake-up call, and if strictly enforced, Harvey’s well-intended recommendations would have been very damaging for the industry. Many industry insiders feel there was not enough cooperation and communication between the Organic Trade Association and Harvey, and that the fight could have been avoided.

Regardless, the net effect of eliminating some of the materials on the allowable synthetics list, such as calcium hydroxide, a.k.a. ‘burnt lime’, would have eliminated organic sugar and possibly the many organic products that are sweetened with sugar. That would have translated into great hardship for thousands of organic sugar cane farmers and scores of organic processors—not to speak of retailers and consumers. Eliminating natural flavor extracts would have meant that many other organic products available today would disappear. These are just a couple of examples of materials on the allowable synthetics list that, if eliminated, would have far-reaching and damaging effects on the industry.

On the other hand, perhaps the door was open for too many new synthetic ingredients that could have resulted in the watering down of organic principles. I don’t mind stricter and tighter rules, so long as they are reasonable and sustainable and do not injure life.

OP: As you look toward the future, how do you think the organic industry will change?

Stephens: We’ll continue doing what we do best, regardless of what others may or may not do. Our goal is to become a trusted name for organic foods in every home. We have our succession plan in place, which consists of our daughter, son, and our employees.

As my father, Rupert Stephens told me out in the fields of our Goldstream Berry Paradise farm in the 1950s, “Always leave the Earth better than you found it.” That’s our inheritance; that’s our legacy.